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Local Government Budgeting: The Econometric Comparison of Political and Bureaucratic Models

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  • Martin Feldstein
  • Daniel J. Frisch

Abstract

The current paper presents a method of deciding the question of whether any given stage in the budget process is an example of the "political" or the "bureaucratic" model. We then use it to study local government spending on education. The basis for our method is the important difference between the effect of intergovernmental aid that is implied by the political budget model and by the bureaucratic budget model. According to the bureaucratic model, the effect of inter-governmental aid on each category of educational input (e.g., teachers' salaries, books, etc.) depends only on the change in total educational spending induced by the aid and not on the type of aid that causes the change in spending. In contrast, the political budget model implies that the overall expenditure increase is the result of separate decisions on each of the expenditure categories and that the changes in these expenditure categories will depend on the form of the intergovernmental aid. Our method of exploiting this difference is presented in detail below.

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File URL: http://www.nber.org/papers/w0207.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0207.

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Date of creation: Oct 1977
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Handle: RePEc:nbr:nberwo:0207

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  1. Feldstein, Martin S, 1975. "Wealth Neutrality and Local Choice in Public Education," American Economic Review, American Economic Association, vol. 65(1), pages 75-89, March.
  2. Roy W. Bahl & Robert J. Saunders, 1966. "Factors Associated With Variations In State And Local Government Spending," Journal of Finance, American Finance Association, vol. 21(3), pages 523-534, 09.
  3. Stern, David, 1973. "Effects of Alternative State Aid Formulas on the Distribution of Public School Expenditures in Massachusetts," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 91-97, February.
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